Multiple studies from the PI's group (now supported by many other groups) have demonstrated that both protein phosphatases 1 (PP1) and 2A (PP2A) function as direct ceramide-activated protein phosphatases (CAPPs) in vitro and in cells, mediating many of the growth-suppressor functions of ceramide. This proposal focuses on defining the molecular determinants of the interaction of ceramide and CAPPs and their physiologic significance. Exciting new information has been generated from two ongoing discoveries: first, preliminary studies show that sphingomyelinase-generated ceramide at the plasma membrane activates PP1, leading to dephosphorylation of beta-catenin. Second, we have established that PP1 is potently inhibited by phosphatidic acid (PA), an emerging bioactive lipid with proposed pro-mitogenic activities. PA is formed primarily by the action of phospholipase D (PLD), and although much insight has developed into the biochemical and physiologic regulation of PLD, very little is known about the direct mechanisms of action of its product, PA. Our studies identified PP1 as the most tight-binding target for PA, with a KD of 1-10nM; at least 3 logs lower than other previously suggested targets of PA (such as raf and cAMP phosphodiesterase). Given the opposing effects of PA and ceramide on cell signaling and cell function, and since we find that they regulate CAPP in opposite directions, we hypothesize that CAPP is a direct cellular target for both ceramide and PA in vitro and in cells. To test this hypothesis, we propose the following specific aims: 1) To determine the PA binding site in PP1/CAPP. 2) To determine the cellular regulation of CAPP by PA. 3) To determine the coordinate regulation of CAPP by PA and ceramide, focusing on the regulation of phosphorylation of specific intracellular substrates (e.g. beta-catenin). The results from these experiments begin to define highly specific and compartmentalized pathways of activation of CAPP by ceramide. The proposed studies should also establish a direct and physiologically-important target for PA. Mechanistically, the proposed studies will result in the identification of a novel PA binding domain as well as a ceramide binding domain. These studies should generate significant insight into novel aspects of signal transduction, regulation of phosphatases, and the regulation of cancer cell growth.